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Welcome. Twentieth Lecture for ITEC 1010 3.0 A Professor G.E. Denzel . Discussion of more aspects of E-commerce . Agenda. Discussion of more aspects of E-commerce . Globe and Mail ROB . E-Commerce / E-Business.

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Twentieth Lecture for ITEC 1010 3.0 A

Professor G.E. Denzel

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E-Commerce / E-Business

  • First of all, review Lecture 12 (based on Chapter 8), for coverage of many of the issues for Chapter 12.

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Types of E-Commerce

  • Business-to-business EC (B2B)

  • Collaborative commerce (c-commerce)

  • Business-to-consumer EC (B2C)

  • Consumer-to-businesses (C2B)

  • Consumer-to-consumer (C2C)

  • Intrabusiness (intraorganizational) commerce

  • Government-to-citizens (G2C) and others

  • Mobile commerce (m-commerce)

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E-commerce classification

  • Business-to-consumer EC

    • companies sell directly to consumers over the Internet

  • Business-to-business EC

    • two (or more) businesses make transactions electronically

  • Intrabusiness EC

    • transactions take place within an organization

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Evolution of EC

  • Began in the early 1970s

    • Electronic Funds Transfer (EFT)

    • Electronic Data Interchange (EDI)

  • At the beginning of 90s

    • Internet and WWW

  • Scope:

    home banking, shopping in electronic stores buying stocks, finding a job, conducting an auction, collaborating electronically with business partners around the globe, and providing customer service

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For organizations:

Expands market place

Supports operations with business partners

Decreases the time when products travel between organizations

Minimizes distribution channels

Reduces paper-work

For customers:

Decreases prices

Gives more choices on the market

Shopping around the clock

Supports mass customization

Benefits of EC

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Limitations of EC

  • Technical limitations

    • Lack of universally accepted standards:

    • Insufficient telecommunications bandwidth

  • Non-technical limitations

    • Lack of confidence to the electronic transactions

    • Lack of national and international regulations

    • Lack of infrastructure supporting EC applications

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Business-to-Consumer EC

  • Most visible part of EC

  • Internet-based EC

  • Based on corporate Web-server

  • Non-internet EC applications

  • Delivers products and service in various forms

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Electronic Shopping Model

  • Shopping and browsing

  • Items and Merchant selection

  • Ordering and Negotiation

  • Payment selection

  • Payment authorization and transport

  • Confirmation

  • Delivery products or services

  • Reimbursement based on authorization

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Electronic Retailing

  • Solo Storefronts

  • Electronic Malls (Cybermalls)

    • A collection of individual shops under one Internet address

    • Success depends on the popularity of the entire collection of stores as well as on its own efforts

    • Malls generate streams of prospective customers who otherwise might never have stopped at the store

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Figure 12.6 Electronic commerce consumer behavior model. [Source: Turban et al., Electronic Commerce: A Managerial Perspective. Prentice Hall, 2000.]

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Advertising Online

  • Advertisement

    • information disseminate in order to attract buyers

  • Internet Advertisement

    • can be updated any time

    • can reach very large numbers of potential buyers

    • is cheap

    • can be based on multimedia

    • can be interactive and targeted to specific interest groups and/or individuals

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Advertising Methods

  • Banners - Electronic Billboards

    • Keyword banners

    • Random banners

  • E-mail

  • Chat rooms

  • Newsgroups

  • Internet communities sites

  • Electronic catalogs

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Attracting Visitors to a Site

  • Making the top list of a search engine:

    • Provide information to search engines databases

    • Use proper description in the HEAD part of HTML documents

  • Online events:

    • Contests

    • Free samples

    • Discounts

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Business-to-Business Applications

  • Based on:

    • Extranets

    • VANs

  • Information shared:

    • Products -specifications, prices, sales history

    • Customers - sales history and forecasts

    • Suppliers - product line and lead times, sales terms and conditions

    • Transportation - carriers, lead times, costs

    • Inventory - inventory levels, carrying costs, locations

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Seller-Oriented Marketspace

Organizations attempt to sell their products (services) to other organizations electronically

  • Similar to BTC model:

    • Seller Web-site contains a catalog

    • Buyers can place orders

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Buyer-Oriented Marketspace

EC technology is used to reduce the cost of goods and the administrative cost

  • Buyer’s Web-site contains:

    • Request For Quotation (RFQ)

    • Accepts proposed bids,

    • Clarifications are made via e-mail

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Intermediary-Managed Marketspace

link between buyers and sellers

  • Exchanges:

    • Multiple buyers and multiple sellers

    • A bid-ask system

  • Auctions:

    • Buyers submit their bids

    • Items are sold to the higher bidder

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Limitations of Traditional Payment Systems

Traditional methods: cash, checks, money orders, credit cards

  • Limitations:

    • Requires face-to-face contacts

    • It takes much longer to provide necessary information

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Online Payment Systems Characteristics

  • Transaction types:

    • Micropayments and largepayments

  • Operational characteristics:

    • Online transactions

    • Offline transactions

    • Established business relationships

    • Impulse buyers

  • Responsibilities

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Electronic Payment Forms

  • Electronic checks

  • Electronic credit cards

  • Electronic cash

  • Smart cards

  • Electronic Funds Transfer

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Smart Cards

Contain embedded microchips or secondary storage:

  • Microprocessor with memory chip

    • 8-bit CPU, 512b RAM, 32Kb ROM

  • Memory chip: up to 4Kb

  • Optical memory cards – up to 4 Mb

  • Examples:

    • Doors, parking lots, medical id cards

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Security Requirements

  • Authentication

  • Integrity

  • Non-repudiation

  • Privacy

  • Safety

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  • Plaintext

    • the message in the original format

  • Ciphertext

    • The message in the unreadable form

  • Encryption algorithms

    • Mathematical formula

  • Key

    • A certain combination of symbols

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Key Systems

  • Symmetric systems – private key systems:

    • A single key is used to encrypt and decrypt

    • Long keys support security

  • Asymmetric systems – public key systems:

    • 2 keys – private and public

    • If text is encrypted by one key, it can be decrypted only by another

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Public Key Encryption

Public Key of


Private Key of










Public Key of Sender


Private Key of Sender




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Digital Signatures

  • Personal information encrypted by a public key of a receiver

  • Is used for:

    • Authentication of a sender

    • Confirmation that message content had not been change

    • Can be time stamped

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Digital Certificate

  • Confirms that the holder of private and public keys is the right person

  • Issued by a third party – Certificate Authority

  • Private and public keys are to be submitted along with personal information

  • Has expiration date

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Secure Socket Layer (SSL)

  • Placed between transport layer (TCP) and application

  • SSL for Internet is Transport Layer Security

  • Implemented:

    • As a part of a set of protocols

    • Embedded into software packages (especially browsers)

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SSL Operation

A combination of encrypted algorithms and authentication method is a cipher suite

  • SSL selects the strongest available cipher suite

  • Web-based application:

    • HTTPS

    • All outgoing messages can be encrypted

  • See SSLnotes under Course Notes

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Secure Electronic Transactions

SET is designed by Visa and Master Card

  • A customer has an account with a financial institution that supports SET

  • The customer possesses a certificate with private and public keys

  • Merchant has certificated for digital signatures and key exchange

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Encrypted payment process

  • Encrypted credit card information is sent to the seller’s site

  • The seller passes the encrypted information to the third party

  • The third party contacts seller’s financial institution

  • Seller’s Financial institution contacts buyer’s financial institution and receives approval or denial, replies to the third party

  • The third party passes on approval to the seller